Advice for young person (re)building credit?

First of all I would like to thank all of you for the helpful forum! I will be turning 25 soon, and have decided that I would like to make an effort at building a stronger credit history. I will try to give all of the important details that may be needed - but please feel free to ask for anything that I have missed.

I was able to pull two of my free credit reports (TransUnion and Experian), but Equifax is requiring a paper form. I will start out by saying that I do not have much in the way of credit history, and have only one open account. I have a credit card with a maximum limit of $700 that is branded Bank Atlantic - I believe this is issued by Barclays. This card has been open for almost two years without a single late payment. I usually keep the balance close to zero although the last report was at $390. TransUnion did not have a single derog reporting, but Experian reported a paid charge-off of $197 which I believe was originally reported in 2003. (Latest reporting date was in 2004 when the payment was made.) I requested a credit increase on my card at the beginning of this year; however, after pulling my report they told me that I was not allowed to request a credit limit increase because of the program that I was in.

Lastly, I would like to mention that I am a member of Navy Federal Credit Union. I have seen mention of it here on the board, however I have only savings and checking.

My questions would be:

1) I am living overseas, and would love to have my CL increased (or to open another card) so that it would be possible to buy two international aircraft tickets in an emergency. What should I do?

2) I would like to increase my credit rating so that I will be in a better position to buy a home one day. What can I do?

Re: Advice for young person (re)building credit?

If you know of someone (usually a family member) that will add you as an AU to their CC (this CC must have a longer history then 4 years and have no derogs) This will give you a longer history which will bring your scores up.

The longer the history the better BUT no lates or anything else. The CL doesn't matter but the UTIL should be under 9%. Their UTIL comes to you as well as history.

The baddie that you have now is helping your length of history. (date opened 2002). If you are an AU on a CC that was opened in 1995 then your LOH will be 14 years.

Re: Advice for young person (re)building credit?

Now that this has been moved, would any one here have advice for me as far as the credit card goes?

I know that my family would probably give me AU access to a line of credit, but I wouldn't want it. My parents have mismanaged credit all of their lives, and I don't wan't to: A) follow in their footsteps or B) associate any of their CCs with my file.

Re: Advice for young person (re)building credit?

I am a BIG NFCU fan!!! They tend to treat members well with solid CLs. I won't say appy but if you need the CL then NFCU is probably your best bet for a useable CL

I had a derog from 2003 (a paid tax lien) and they issued both a Visa and MC within 3 months of each other (I suffer from the 2 hard INQs though) at a CL of 14K each (the first was instant and the second went to committee but was approved in 1 day) - but I also had 690s on EQ at the time. Both of mine are Plat cards (no rewards). The rewards cards are automatically a higher APR so if carrying a balance is a posibility then go for rate over rewards.

Re: Advice for young person (re)building credit?

Thanks for the info on the cards! Would any one give me advice on weather applying would help or harm my scores?

Thanks!

This varies. In terms of the "new account" and "seeking credit" dings, if you have little or no open revolving credit (CC's), it should help your scores. If you already have maybe 3 or 4, there probably won't be much impact. If you have more than that, you'll probably see a drop.

Wherever you are, you should first calculate the impact on your AAoA (average age of accounts.) Take ALL the accounts showing on your reports, both open and closed, and figure how long they've been open, expressed in months. So if you have a closed auto loan opened in February 1998, it would be 11 years, 3 months old, or 135 months old. Do this for all the accounts on a report, add up the ages in months, and divide by the number of accounts to get your average age of accounts in months. Then figure that out in YY/MM.

The rule of thumb, learned the hard way by many of us here, is that you don't want to drop your AAoA under a whole number of years. So if your AAoA is 5y10m, and adding two accounts would drop it to 5y3m, your AAoA would still display as 5 years, and the only change would be that you have to wait longer to get to 6 years. But if your current AAoA is 5y4m, and new accounts would take you to 4y9m, your scores would probably be hurt.

I got killed on my scores when I picked up a bunch of new accounts, both from severely dropping my AAoA and from the new credit ding. I knew it was coming, but I felt that I needed to upgrade my credit profile, and so I waited it out, and now my scores are better than they were. But it took a solid year, and when it first hits, there's nothing quite like seeing a 75-point score drop.

Re: Advice for young person (re)building credit?

Thanks for all of the advice! Even though I will probably take a hit because of the AAoA - my util will be much lower. Also, because I have so few accounts reporting, I am going to take a big hit on the AAoA. Once I am more established, opening new accounts wouldn't hurt so badly.

Because my #1 goal right now was to increase my credit limit, I decided to go ahead and app the NFCU platinum Visa. I was not approved instantly, so I guess I'll have to sit back and wait to see what happens. Assuming I am approved with a decent limit, I'll sit back for another year or two and consider my options.

Re: Advice for young person (re)building credit?

i worked as a CC specialists at navy federal credit union and i see a lot of talk on here about them and CC's I worked there for 2 yrs so i know the in and outs about there lending with all products. Iam young myself starting out with medical bill debt. i was denyed at a couple places before i started working there, but i thought i would give it a try. now just because i worked there didnt make my chances greater at gettin approved. i was 19 when nfcu gave me my car loan when i didnt have a good fico score. they have a risk based lending program. this means that our standards for Credit history is a little lower than other comapnys we have enough mney to take a chance to risk loosing money. so you have a greater chance to be approved there or anywhere that has risk based lending. Now of coarse you might get a higher interest rate at first..but once credit is established u have the right to apply for a lower rate you just gotta ask and give a couple months with nfcu they ask for atleast a year. Car loans are easier to get than personal loans or CC because its a loan held by collateral ..and anytime collateral is involved it lowers the co. risk at loosing as much money. I would suggest anyone that is tryin to bulid credit history to try at nfcu first. if denyed for a CC (and it wont hurt ur credit score too much to apply) but if denied def. go with a secured CC start out with 300-1000...whichever i can come up with and bulid ur history on paying interest on ur own money.it sucks to pay interest on ur own money but it def. favors u in the end results. Im speakin from personal experience on how my credit was improving and still is with all my lines of credit at nfcu...we have good credit card programs and no bad major catches like big raises on interest for no reason...or lower the CL due to economic reasoning...i would suggest u call nfcu to get more information...tho i could answer and write many pages about it...but i def. suggest to start out there..the highest rate is 17.9 now...unlike other that are at 20-30 some precent...

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